The competition regulator is forcing Telstra to cut the price it charges wholesale customers for broadband on its legacy copper network. These wholesale customers then sell the high-speed broadband to their own retail customers.
The Australian Competition and Consumer Commission has ordered Telstra to reduce wholesale prices in metropolitan areas to $24.56 a month for access to the network from $25.40. In rural areas prices will fall to $29.81 from $30.80.
The competition watchdog has the power to regulate the price that Telstra charges wholesale customers - who are also retail-level competitors - to rent services on Telstra's copper network. The rollout of the national broadband project will end Telstra's monopoly of copper network services.
"Setting regulated prices for access to Telstra's wholesale ADSL service will assist access seekers to offer a range of competitive fixed-line broadband internet services to retail broadband users," ACCC chairman Rod Sims said on Tuesday.
He said the move was aimed at fostering competition in retail fixed-line broadband markets while providing investment incentives in the transition to the national broadband network.
The ACCC insisted it would not grant geographic exemptions to Telstra when it applies the regulated wholesale price reduction. The nation's dominant telco argued that certain areas need to be exempted from price regulation where its three largest competitors were present.
"From our initial reading it appears the ACCC has largely retained the balance of charges across access and usage set out in the interim access determination," a Telstra spokesman said.
The ACCC decision will have "an immaterial impact on our earnings estimates" for Telstra, says Goldman Sachs in a note to clients.